World food prices that fell from a record last month may rebound, the United Nations said, after grains rallied on reports of shrinking stockpiles.
An index of 55 food commodities dropped 3 percent to 229.8 points from an all-time high of 236.8 in February, the UN’s Rome-based Food and Agriculture Organization said in an online report today. That was the first slide since June and came as wheat fell 6.6 percent and corn 5.2 percent in Chicago trade last month.
Prices have rallied since as U.S. corn stockpiles fell to their lowest since 2007 and soybean inventories shrank to the smallest since 2003. Costlier food contributed to riots across northern Africa and the Middle East that toppled leaders in Egypt and Tunisia and is driving up inflation, spurring central banks to consider higher interest rates that may slow growth.
“We may see that prices spring back and resume the upward trend,” Concepcion Calpe, an economist at the FAO, said in a phone interview today. “Demand for food, feed and biofuel is very strong and the production increase may not be sufficient to increase stocks to safe levels.”
Corn Stockpiles Falling
Corn has more than doubled in the past 12 months amid concern that higher planting in the U.S., the world’s largest grower, won’t be sufficient to rebuild global stocks. U.S. corn stockpiles at the start of March fell to 6.52 billion bushels, the lowest for the date in four years, the Department of Agriculture reported last month.
The situation for corn “is the most preoccupying,” Calpe said.
Wheat surged 68 percent in the past 12 months and soybeans gained 45 percent as flooding in Canada, China and Australia and drought in Russia and Europe ruined crops. China is now contending with an increase in pests in its wheat-growing regions while U.S. crop conditions are rated at their worst since 2002.
“Last year we had much bigger inventories of everything. Now we have much lower inventories and no sign of rationing on the demand side,” Abdolreza Abbassian, a senior economist at the FAO, said ahead of the report. “We’re going to see more volatility, rather than less, in prices.”
The FAO’s food-price index fell for eight months in a row after reaching its previous peak in June 2008, a situation that probably won’t be repeated this year, Calpe said.
“It’s very unlikely to continue to fall,” Calpe said. “The fear is that the price index has fallen not because of fundamentals but because of events that go beyond the market itself, for example Japan.”
Japan was hit by its strongest earthquake on record on March 11, followed by a tsunami that crippled a nuclear plant north of Tokyo, causing radiation to leak. Food prices fell last month on concern Japan might cut food imports, Calpe said.
The FAO’s cereal price index declined to 251.9 points from 258.6 in March and its cooking-oil gauge fell to 259.9 from 279.3, the first drop in nine months for both. The index for sugar declined for a second month to 372.3 points from 418.2.
Stable rice prices and good harvests in sub-Saharan Africa and Asia last year have warded off a food crisis, according to Abbassian. Rice futures gained 8.2 percent in the past 12 months in Chicago trading.
Planting More Corn
Farmers in the U.S., the world’s largest exporter of corn, wheat and soybeans, will plant their second-most acres of the grain since 1944, according to a government survey last week. Inventories will still take more than a year to rebuild to a comfortable level, the USDA’s chief economist, Joe Glauber, said yesterday.
Global food prices probably will rise in this century’s first half because of an expanding population, higher incomes, slower growth in yields and the effect of climate change, Ross Garnaut, the Australian government’s climate-change adviser, said last month.
“In a lot of countries you have positive income growth, and this has a positive effect on demand for a lot of products, including meat,” Calpe said.
The FAO’s meat price index continued to climb in March, advancing to 168.6 points from 167.9, while the gauge for dairy prices jumped to 234.4 points from 230.
Food output will have to climb by 70 percent from 2010 to 2050 as the world population swells to 9 billion and rising incomes boost meat and dairy consumption, the FAO forecasts. Producing 1 kilogram (2.2 pounds) of pig meat can take 3.5 kilograms of feed, USDA data shows.
The number of hungry people in the world will increase as higher food prices are passed on in domestic markets, according to Abbassian. The number of undernourished people globally declined last year to 925 million from more than 1 billion in 2009. About 44 million people have been pushed into poverty since June by the “dangerous levels” of food prices, World Bank President Robert Zoellick said in February.
“People will be hurt,” Abbassian said. “We’re not talking about normal prices here. The sort of price rises we’re getting, it doesn’t look like something that’s going to go away, like in 2007-08. It may be much longer.”
World grain production in 2010-11 is forecast to drop 1.1 percent to 2.24 billion metric tons, the UN agency said in a separate report today, little changed from its March outlook. Cereal usage is estimated at 2.28 billion tons, exceeding production. The FAO raised its projection for ending stockpiles by 1.7 million tons to 479 million tons.
Global wheat output will be 654.8 million tons, up 1.1 million tons from the previous UN outlook. The harvest of coarse grains including corn and barley will be 1.11 billion tons, 2.7 million tons less than forecast in March. Milled-rice output is seen at 466.5 million tons, little changed from a month ago.
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